WSJ: China Still Buying U.S. Bonds

By Johanna Bennett

The Wall Street Journalreports that China bought more Treasury debt in October than any other foreign investor – a sign that the Treasury bond market retain its status as a global safe harbor.

According to the WSJ:

China boosted its Treasury debt holdings by $10.7 billion in October to $1.3045 trillion, according to the latest monthly capital flows data released by the Treasury Department on Monday. Foreign investors overall added $24.4 billion in Treasury debt holdings in October. China primarily bought T-bills due in one year or less, known as T-bills with $8.4 billion added in October. China’s overall holdings of Treasurys at the end of October marks the second highest level following a record high of $1.3149 trillion set in July 2011, according to Ian Lyngen, senior government bond strategist at CRT Capital Group LLC. China is the largest foreign owner of Treasury debt.

October was a rough month for the bond markets. The U.S. government was partially shut down for 16 days when fears that the world’s biggest economy could miss debt payments ignited a selloff in some short-term Treasury notes.

But the Treasury debt market recovered after lawmakers reached an agreement in mid-October that pulled the U.S. back from default.

During the standoff, Chinese officials engaged in saber rattling. Analysts attributed the bond buying from China to less fear of a sharp rise in bond yields after the Federal Reserve refrained at its September policy meeting from cutting back its $85 billion-a-month bond-buying program.

The WSJ reports:

China added $2.3 billion in Treasury notes and bonds in October, after reducing the holdings by $5.6 billion in September. For the year, China’s overall holdings of Treasurys have increased by $84.1 billion.